U.S. TELECOM CARRIERS RAISE COMPETITION CONCERNS TO USTR

Not surprisingly, several commenters continued to raise particular concerns over adherence by Japan and Mexico to commitments they made under WTO basic telecom agreement. Last year, USTR held consultations with Mexican govt. and sought establishment of WTO settlement panel. Issues raised by U.S. have included failure by Mexican govt. to rein in incumbent carrier Telefonos de Mexico (Telmex) from acting anticompetitively and not ensuring cost-based, timely interconnection. U.S. also has complained that Mexican regulators hadn’t permitted competition for termination of international calls there. Some of those problems were addressed in agreement that Telmex reached in late Dec. with Avantel and Alestra, in which Telmex agreed to allow those rivals to interconnect to its local network to provide competing local services. (WorldCom has stake in Avantel and Alestra is partly owned by AT&T). Other parts of agreement included commitment by Telmex not to block implementation of 2001 interconnection rate established by Cofetel of 1.25 cents per min. for terminating long distance traffic.

WorldCom urged USTR to move forward with dispute settlement process at WTO on competition problems in Mexico. Lingering problems, WorldCom said, include: (1) Continued lag in enforcement by Mexican regulator Cofetel of rule that gives Telmex sole authority to negotiate accounting rates with foreign carriers, meaning rivals can’t offer market-based rates for international calls. (2) Refusal by Cofetel to allow implementation of flexible, cost-oriented international termination rates instead of current accounting rate. (3) Lack of response by Cofetel to finding by Mexican Federal Competition last year that Telmex was dominant in 5 markets. (4) Lack of transparency in Cofetel decision-making.

Global Crossing (GC) raised concerns on compliance of Japan, European Union, Colombia and Mexico with WTO basic telecom agreement, particularly market barriers for facilities-based competitors. In case of Taiwan, GC urged USTR to make U.S. support for Taiwan’s accession to WTO contingent on country’s meeting market-opening commitments in bilateral agreement. GC complained Japan, despite recent moves toward deregulation, still has in place “unclear filing and approval requirements for tariffs and service contracts.” Beyond that, GC said Japan should clarify requirements for different types of licensees. GC said its Asia Global Crossing subsidiary faces legal and bureaucratic barriers to land and operate its East Asia Crossing undersea fiber network. In China, existing regulations appear to bar network from landing and in Korea it could be required to cede control to local partner, GC said: “Other countries limit the services that Global Crossing may provide and the customers it may serve [Taiwan] or impose overly burdensome regulatory requirements on Global Crossing’s operations [Japan].” In EU countries, GC said it faced obstacles in obtaining nondiscriminatory access to rights-of-way. That problem stems from lack of effective enforcement of existing national laws and “lack of action on this issue by the European Commission,” GC said, charging that competitors faced barriers in building out networks.

GC wants USTR to encourage EU to: (1) Reexamine existing requirements in that area. (2) Require member states to enforce existing legislation and to adopt EU-wide standard for access to rights-of-way. Elsewhere in world, GC told USTR that Colombia had failed to open international carrier services market to competition, which company said was WTO agreement oversight that “should be remedied immediately.” In Mexico, GC joined other telecom companies in supporting U.S. request for WTO panel to address complaints that country continued to flout WTO obligations.

Despite recent progress in Peru, BellSouth reiterated concerns it raised with USTR last year that regulators there weren’t honoring WTO commitments. Peru’s OSIPTEL indicated late last year it was reducing interconnection rate for wireless service for fixed network operated by Telefonica del Peru. New rate ratchets down to $.0096 by July 1, 2002, although BellSouth told USTR it would prefer to see reduction made immediately. BellSouth contended OSIPTEL undercut impact of reduction by dramatically restructuring compensation structure for fixed-to- mobile calls, which comprise bulk of BS traffic in Peru. New interconnection rates won’t apply to those calls. Because calling party pays applies to 70% of BellSouth’s business, carrier said it “would be significantly harmed relative to the local dominant carrier” if changes went into effect.

“Ironically, the end result of OSIPTEL’s actions would thus be to remove competitive pressures in the mobile market while at the same time strengthening the already dominant fixed operator by, in effect, giving it control of F-M [fixed-to-mobile] pricing,” BellSouth said. In response to concerns it had raised, BellSouth said OSIPTEL agreed to put off implementation of new rules until March 1. Carrier is asking USTR to seek consultations with regulators immediately.

Covad Communications focused on implementation by EU member states of WTO basic telecom agreement commitments, particularly in how they have addressed requirements to unbundle local loops and conduct line-sharing. “As nondiscriminatory terms and conditions” are needed to provide similar services to competitors as incumbents provide to themselves, Covad said, EU members should require “major suppliers to provide inputs essential to the competitive provision of DSL services on the same basis as major suppliers’ self-provision.” In Dec., European Parliament and Council established regulation on unbundled access to local loop. “While the objective of the regulation is clear, its future implementation on an effective and timely basis by individual NRAs [national regulatory agencies] is far less predictable,” Covad told USTR.

Telecommunications Industry Assn. (TIA) outlined barriers that telecom equipment manufacturers face in getting products approved or certified for use in certain markets. Although NAFTA dates back to 1994 and held out promise of harmonization of testing requirements, equipment certification still hasn’t been simplified in Mexico, TIA said. “Mexico continues to ignore its national treatment obligations under NAFTA to the detriment of the U.S. telecommunications industry,” TIA said. CompTel also highlighted what it charged were transgressions in market-opening commitments of Germany, Mexico, S. Africa, Japan, Taiwan. CompTel said its past concerns about high national license fees in Germany have not been resolved since last year, with fees in place that range from $1.7 million to $6 million. CompTel also told USTR that in Mexico, regulator hadn’t ensured “timely, nondiscriminatory” and cost-based interconnection with Telmex at any point in its network that was technically feasible. Telmex charges domestic and international interconnection rates that are higher than its costs, CompTel said in comments that are part of USTR’s annual Sec. 1377 review. In S. Africa, incumbent Telkom SA has denied access to its facilities since mid-1999 to competitors who seek to provide value-added services, CompTel said. As result, new rivals must obtain leased circuits from Telkom to provide such services, group said.